What is earnest money in real estate?

In most cases, earnest money can also act as a deposit on the property you’re looking to buy. This Redfin article gives an overview of what earnest money is, why you need it, and how much you may need, and how to protect the money once you deposit it. What is earnest money in real estate transactions?

What is an earnest money deposit?

Earnest money is put down before closing on a house to show you're serious about purchasing. It's also known as a good faith deposit. When a buyer and seller enter into a purchase agreement, the seller takes the home off the market while the transaction moves through the entire process to closing.

Why do you need an earnest money deposit when buying a home?

When buying a home, an earnest money deposit is used to show the seller that you, as the buyer, are committed to purchasing the property from them. To prove their good faith, the seller will take the home off the market. Then both of you can move one step closer toward closing.